Insurer profitability in different regulatory and legal environments

This paper examines the variation in insurance company financial performance across states with different legal and regulatory environments. These environments are distinguished by a diverse set of measures created by the states to address problems in the insurance area. Using firm-level financial data for the period 1984-1991, quantile regression methodology is used to describe the differential relationships between profitability and these measures. The results indicate that the distribution of profitability is only weakly related to insurers' regulatory and legal environments, and is significantly related to other factors, such as the size of the firm and the effective number of competitors.